The FTSE 100 Is Dirt Cheap: Take Advantage With SABMiller plc, Rio Tinto plc & Banco Santander SA

SABMiller plc (LON:SAB), Rio Tinto plc (LON:RIO) & Banco Santander SA (LON:BNC) may be worth buying now the FTSE 100 (INDEXFTSE:UKX) is even better value!

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

FTSE100

Although the FTSE 100 has enjoyed a couple of strong sessions in recent days, it remains over 4% down during the last month. This puts it on a dividend yield of 3.5% and a price to earnings (P/E) ratio of just 13.2.

Both of these numbers indicate that the index remains attractive – especially when you consider that the S&P 500 trades on a P/E ratio of 18.8 and yields just 2%.

Furthermore, the UK and global economies seem to be on the up, while Central Banks across the developed world seem committed to an ultra-loose monetary policy for as long as it takes to push economies past a potential deflationary period.

So, with this in mind, here are three stocks that could be worth buying now that the FTSE 100 has pulled back and while it continues to have a bright future.

SABMiller

As today’s investor update from SABMiller (LSE: SAB) highlighted, there is growth potential in beer. That’s not just in emerging markets, but in developed markets, too, where SABMiller plans to change people’s perceptions of beer through new flavours and a new marketing angle.

Of course, SABMiller seems to be performing well even without a new marketing strategy. For example, it is forecast to increase earnings by 10% next year and, with a strong track record of growth, the company remains a hugely reliable earnings grower for long-term investors.

With shares in the company having pulled back by 2% in the last month, their defensive qualities have also come to the fore. With further turbulence likely, that could prove to be a real asset for investors moving forward.

Rio Tinto

With shares in Rio Tinto (LSE: RIO) falling by 7% over the last month, it is clear that market sentiment remains low after a weak iron ore price has hit profitability at the company. However, at least partly due to increased efficiencies and cost cutting, Rio Tinto seems to be in good shape moving forward.

Indeed, the company is forecast to increase its bottom line by 4% next year. This may seem rather pedestrian, but could be a relatively strong performance given the tumbling iron ore price.

Furthermore, Rio Tinto now trades on a hugely attractive P/E ratio of 9.5 and yields a well-covered 4.4%. As a result, it could be worth buying for the long haul.

Santander

While many UK banks may have had a disappointing 2014, shares in Santander (LSE: BNC) have risen by 8% year-to-date. A key reason for this is the bank’s excellent growth forecasts, with it being expected to grow its bottom line by 50% over the next two years.

Although shares do trade on a premium rating to the FTSE 100 of 15.1 (versus 13.2 for the index), their strong growth potential means that they have a price to earnings growth (PEG) ratio of just 0.6. This means that, while not cheap, they seem to offer good value and, with the company and the wider index having bright prospects, they could be worth buying on a long term view.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »